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Facts
The assessee, an agriculturist, did not file an Income Tax Return. The case was reopened based on information of cash deposits and withdrawals. During reassessment, the AO noted a Long Term Capital Gain (LTCG) from the sale of land and building, which the assessee had reported. The AO, without specific reason for reopening related to LTCG, taxed the entire sale consideration as LTCG.
Held
The Tribunal held that once the initial reason for reopening (cash deposits) was found to be explained and no addition was made on that score, the AO's jurisdiction to assess other escaped income (LTCG) that came to his notice subsequently, ceased. The Tribunal relied on the jurisdictional High Court's decision in Shri Ram Singh's case.
Key Issues
Whether the AO, after the initial reason for reopening was discharged, has jurisdiction to assess other escaped income that came to his notice during reassessment proceedings, when no addition was made on the original ground of reopening.
Sections Cited
147, 144B, 139, 148A, 148
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 1292/P/2025
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 1292/P/2025 fu/kZkj.k o"kZ@Assessment Year : 2019-20 cuke Ram Khilari Meena ITO, Vs. Bada BAS, Mandawar Mahwa, Ward Dausa 321609 Dausa LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: BIDPM3745G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Mukesh Khandelwal, CA jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 08/10/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 28/10/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM On being aggrieved by the order of the National Faceless Appeal Centre, Delhi dated 15/09/2025 [ for short CIT(A)] the above named assessee preferred the present appeal. The dispute relates to the assessment year 2019-20. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order dated 17.02.2024 short “Act”] by Assessment Unit of Income Tax Department [ for short AO].
In this appeal, the assessee has raised following grounds: - “1. That the ld. CIT(A), NFAC has erred in law in sustaining the addition made by ld. AO on account of Long Term Capital Gain on sale of land and building ignoring the vital fact that no addition had been made on the reason framed for reopening of the case of the appellant.
2. Without prejudice to ground no. 1, under the facts and circumstances of the case the ld. CIT(A) NFAC, has erred seriously in not deciding the issue of Long Term Capital Gain even though all relevant material were made available to him and further erred in sending back only part of the matter to the ld. AO for deciding the same afresh.
That the appellant craves leave to add, amend, alter, withdraw any of the grounds of appeal before hearing of the appeal.
3. Succinctly, the fact as culled out from the records is that the assessee – appellant primarily engaged in the agricultural income and is not literate. As there was no Income Tax Return as per provision of section 139 of the Act and there was information on cash withdrawal and deposit in the bank account of the assessee. The case of the assessee was reopened on the basis of such information received where he noted that the assessee had deposited cash of Rs. 55,50,000/- in his bank account and withdrew Rs. 1,18,75,00/- from the bank account. Thereby a notice u/s 148A(a) was issued to the assessee. After verifying the information provided by the Bank of Baroda the ld. AO corrected these figures at Rs.
11,10,000/- as amount deposited and Rs. 26,78,500/- as amount voluntarily and hence he issued notice u/s148 dated 23.03.2023. In response to notice u/s 148 the assessee filed his ITR declaring an income of Rs. 2,27,520/-. In the ITR the assessee had declared a taxable income of Rs. 72,114/- from Long Term capital gain earned on sale of land and building at his village, along with other income. During assessment proceeding assessee - appellant had provided all relevant details as asked by ld. AO. The ld. AO upon satisfaction about the source of cash deposit in the bank account and did not make any addition on this account. But he adjusted capital gain offered by the assessee. In the assessment proceeding ld. AO issued show cause notice dated 29.12.2023. The assessee filed the response to this notice could not be filed in time provided by ld. AO but response was submitted on 08.02.2024. The ld. AO in his instant order dates 17.02.2024 mentioned that no reply had been submitted by the assessee on the SCN and he taxed the sale consideration as reduced by the capital gain declared by the assessee as income of the assessee from Long Term Capital Gain and thereby made the adjustment on the issue which was not subjected to the issue of notice u/s. 148 of the Act and thereby against the returned income of Rs. 2,27,520/- assessed at Rs. 22,55,406/-.
Aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A), NFAC. Apropos to the grounds raised the relevant finding of the ld. CIT(A), NFAC is reiterated here in below:
6. Appellate findings and Decision:-
6.1. The appellant filed return of income on 22/04/23 admitting total income at Rs.2,27,520 being income from "presumptive business" at Rs. 1,57,500 u/s 44AE, an amount of Rs. 14,341 being income from "other sources" and an amount of Rs.72,114 being long term capital gains. However, the AO had information that there are cash deposits in Bank of Baroda A/c No. 225901000006538 at Rs. 11,10,000 and also withdrawals of Rs.26,78,500. The AO observed that it is seen from the ITR filed that the appellant has voluntarily reported sale of immovable property for Rs.21,00,000 and taken credit of Rs. 10,21,898 and reported the balance amount of Rs.72,114 as capital gains. However, the appellant failedto give anything relating to the sale transaction so reported nor any evidence of purchase deed post issue of specific show-cause notice. In view of the above, the AO reworked out the capital gains and income was computed without giving credit for indexed cost of acquisition. Further, the AO took no adverse view on the issue of cash deposits.
7. Ground of Appeal No. 1: The appellant has taken the plea that the Id AO has erred in taxing the whole amount of sale consideration received by the appellant on sale of land and building as taxable income of the assessee ignoring the submissions given by the appellant much before the date of passing order.
7.1 The relevant extract of the AO's order is as under:-
"3.4 Point-wise rebuttal of reply of the assessee including analysis of any case law relied upon. The assessee vide submissions dated 19/01/24 reiterated the earlier submissions narrating that he is an agriculturist and produced evidence of land holdings and narrated about his business activities in "transportation of goods". It was also narrated about the nuclear set-up of his family and agricultural income. It is seen from return of income filed by the assessee for the AY 2019-20, that he has sold an immovable property for Rs. 21,00,000 and out of which credit was taken in respect of cost of improvement with indexation at Rs. 10,21,898 and offered Rs.72,114 as capital gains. The assessee was specifically asked to furnish the evidence for the cost of acquisition of the property which was sold. The assessee did not furnish the details of cost of acquisition and therefore capital gains are worked out based on the information available on record."
7.2 The appellant has stated that the AO failed to consider the reply filed regarding the issue. Perusal of the copy of reply submitted by the appellant shows that the appellant had furnished the purchase and sale deed before the AO. However, no evidence regarding construction had been furnished. In view of the submissions filed, the AO is directed verify the purchase and sale deeds and re- workout the capital gains accordingly. Hence, this ground of appeal is allowed for statistical purposes subject to verification by the AO.
Ground of Appeal No. 2: The appellant has taken the plea that the order of the Id. AO is bad in law even after accepting the replies submitted by the appellant on the basic reason for proceeding u/s 147, and he made addition on some other issue which is not permissible in terms of Explanation to section 147 of the Income Tax Act, 1961.
8.1 The appellant's submissions and judicial precedents cited have been examined. It is pertinent to mention that the issue came to be decided before the division bench of the High Court of Punjab and Haryana in Commissioner, Income Tax Vs. MehakFinvest Pvt. Ltd. reported in 2014 (367) ITR 769. The Hon'ble courtheld as under:
After hearing learned counsel for the parties, in our view, the appeal deserves to succeed. Explanation 3 to section 147 has been inserted by the Finance (No.2) Act, 2009, retrospectively with effect from April 1, 1989. It reads thus:
Income escaping assessment.-
...Explanation 3.--For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.'
This court in Majinder Singh Kang's case(supra), considering the scope of Explanation 3 to section 147 of the Act held that the Assessing Officer is empowered to make additions even on the ground on which reassessment notice might not have been issued where during the reassessment proceedings, he concludes that some other income has escaped assessment which comes to his notice during the course of the proceedings for reassessment under section 148 of the Act. The provision nowhere postulates or contemplates that the Assessing Officer cannot make any additions on any other ground unless some addition is made on the ground on which reassessment had been initiated, Special Leave Petition (Civil) No. 13028 of 2011 against this decision was dismissed on August 19, 2011. The reassessment proceedings, thus, in the present case, cannot be held to be vitiated."
8.2 The Hon'ble High Court of Karnataka in N Govindarajuvs Income Tax Officer reported in Income Tax Appeal 504/2013held as under:
"Considering the provision of section 147 as well as its Explanation 3, and also keeping in view that section 147 is for the benefit of the Revenue and not the assessee and is aimed at garnering the escaped income of the assessee [viz. Sun Engineering (supra)] and also keeping in view that it is the constitutional obligation of every assessee to disclose his total income on which it is to pay tax, we are of the clear opinion that the two parts of section 147 (one relating to 'such income and the other to 'any other income') are to be read independently. The phrase 'such income' used in the first part of section 147 is with regard to which reasons have been recorded under section 148(2) of the Act, and the phrase 'any other income' used in the second part of the section is with regard to where no reasons have been recorded before issuing notice and has come to the notice of the Assessing Officer subsequently during the course of the proceedings, which can be assessed independent of the first part, even when no addition can be made with regard to 'such income', but the notice on the basis of which proceedings have commenced, is found to be valid.
In the end it was vehemently argued by the learned counsel for the appellant that the reason to be given under sub-section (2) of section 148 would be the very foundation of the issuance of notice and if it is false or baseless, then everything goes and the structure erected on such foundation would crumble.
It is true that if the foundation goes, then the structure cannot remain. Meaning thereby, if notice has no sufficient reason or is invalid, no proceedings can be initiated. But the same can be checked at the initial stage by challenging the notice. If the notice is challenged and found to be valid, or where the notice is not at all challenged, then in either case it cannot be said that notice is invalid. As such, if the notice is valid, then the foundation remains and the proceedings on the basis of such notice can go on. We may only reiterate here that once the proceedings have been initiated on a valid notice, it becomes the duty of the Assessing Officer to levy tax on the entire income (including 'any other income') which may have escaped assessment and comes to his notice during the course of the proceedings initiated under section 147 of the Act."
8.3 The Hon'bleGauhati High Court in a recent judgment Deputy Commissioner of Income Tax vs. Toor Finance Company Limited reaffirmed the above stand while deciding the following question of law:
"2. This Court, on 16.02.2024, while admitting the appeal has framed the following substantial question of law:
"Whether the findings recorded by the Hon'ble ITAT is contrary to the provisions of Explanation-3 of Section 147 of the Income Tax Act, 1961 that if no addition is made on the issue which was mentioned for reopening of the case, the Assessment Officer cannot reassess in a case of escaped assessment?"
"15. Having given a thoughtful consideration on the above referred decisions and the provisions of Sections 147 as well as Section 148 of the Income Tax Act, we are in perfect agreement with the view taken by the High Court of Punjab and Haryana in MehakFinvest Pvt. Ltd. (supra) as well as the decision rendered by the High Court of Kamataka in N. Govindraju (supra).
16. Resultantly, the question of law framed in this appeal for appropriate answer is answered in favour of the appellant/Revenue."
8.4 In this appeal also, the facts of the case are similar to the ones discussed above. The AO reopened the case of the basis of information regarding cash deposits. However, during the reassessment proceedings, the AO noticed that the assessee had earned capital gains on sale of immovable proper property which had not been disclosed. The appellant himself admitted the LTCG in the return filed in response to notice u/s 148. However, the AO observed that in spite of providing opportunity to explain the said LTCG, the appellant failed to file any evidence regarding the transaction. Accordingly, the AO proceeded to assess LTCG based on the actual sale consideration and made the addition.
8.5 The source of cash deposits was accepted based on the submissions made during assessment. However, as discussed above, that does not preclude the AO from assessing other escaped income, such as LTCG, especially when it came to light during reassessment proceedings. Hence, the AO has rightly made addition on this account and has rightly exercised his jurisdiction under Section 147. Accordingly, this ground of appeal is dismissed.
9. Ground of Appeal No. 3: This ground is of general nature and does not need specific adjudication. However, the same is dismissed for statistical purposes.
10. In result, the appeal is partly allowed.
5. Feeling dissatisfied with the above finding of the ld. CIT(A), the assessee – appellant filed the present appeal before this tribunal. To assessee, has filed the written submissions in respect of the various grounds raised by the assessee and the same is reproduced herein below:
The appellant is dependent on agriculture and is not literate. He did not file his ITR in terms of section 139(1) of the Income tax Act, 1961. The case of the assessee case was reopened on the basis of information received by the ld. AO that the assessee had deposited cash of Rs. 55,50,000/- in his bank account and withdrew Rs. 1,18,75,00/- from the bank account. Notice u/s 148A(a) was issued to the assessee. After verifying the information provided by the Bank of Baroda the ld. AO corrected these figures at Rs. 11,10,000/- as amount deposited and Rs.. 26,78,500/- as amount withdrawn. Further the ld. AO verified that the assessee did not file his ITR voluntarily and hence he issued notice u/s148 dated 23.03.2023.
In response to notice u/s 148 the assessee filed his ITR declaring an income of Rs. 2,27,520/-. In the ITR the assessee had declared a taxable income of Rs. 72,114/- from Long Term capital gain earned on sale of land and building at his village, along with certain other income. During assessment the appellant had provided all relevant details as asked by ld. AO. The ld. AO was satisfied about the source of cash deposit in the bank account and did not make any addition on this account but regarding capital gain he issued show cause notice dated 29.12.2023. The response to this notice could not be filed in time provided by ld. AO but response was submitted on 08.02.2024. The ld. AO in his instant order dates 17.02.2024 mentioned that no reply had been submitted by the assessee on the SCN and he taxed the sale consideration as reduced by the capital gain declared by the assessee as income of the assessee from Long Term Capital Gain. 1st Appeal : The assessment order was challenged before the ld. CIT (A). Foremost ground of challenge was that since the ld. AO did not make any addition on account of the reason for which the case was reopened he was seized with the powers to make any other additions in the returned income. However the ld. CIT (A) was not convinced and he sustained the action of the ld. AO in this regard by relying on judgments of the Hon`ble Punjab and Haryan High Court and Karnataka High Court. However he did not make any comment on various case laws including case of jurisdictional High Court and ITAT relied by the appellant.
Submissions :- Ground No. 1 : That the ld. CIT (A), NFAC has erred in law in sustaining the addition made by ld. AO on account of Long Term capital Gain on sale of land and building ignoring the vital fact that no addition had been made on the reason framed for reopening of the case of the appellant. The case of the appellant was reopened on the reasoning of cash deposits in the bank account during the relevant previous year and non filing of TR by the appellant (APB 1-2 order passed u/s 148A(d)). During the assessment proceedings the ld. AO was convinced that the appellant had genuine sources for cash deposits in the bank account and he did not make any addition on this account (Page 6 of the assessment order). In the ITR filed by the appellant in response to notice u/s 148 a transaction of sale of land and building was declared by the appellant wherein certain LTCG was offered. The appellant had submitted all requisite documents to prove the correctness of the LTCG so declared. It seems that the documents so submitted by the appellant could not come to his notice and he alleged that since no reply had been submitted by the appellant on correctness of LTCG, the whole amount of sale consideration was treated as taxable LTCG after giving deduction for amount already disclosed by the appellant in ITR. It was argued before the Ld. CIT (A) that since the ld. AO was convinced about the issue on which reassessment notice had been given and no adverse inference had been drawn and hence the ld. AO was not legally correct to disturb any other heads of income. The appellant had relied on following case laws in this regard :-
1. 1. CIT vs Shri Ram Singh [2008] 306 ITR 343 (Raj.) – Relevant Para no. 29 and 32 at page no. 8 of compilation.
2. Soyala Gram Sewa Sahakari Samiti Ltd. Tonk (Rajasthan) v/s ITO, Tonk (Jaipur ITAT) (ITA No. 1116/JP/2024 vide order dated 08.01.2025) 3. CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom)(HC) – Relevant para no. 16 and 17 at page no. 17 of compilation.
4. Ranbaxy Laboratories Ltd. - vs. CIT (2011) 336 ITR 136 (Delhi High Court) - Relevant para no. 21 at page no. 28 of compilation.
5. ITO v Bidbhanjan Investment & Trading CO (P ) Ltd ( 2011) 59 DTR 345 ( Mum) (Trib) – Relevant para no. 17 at page no. 35 of compilation.
6. Dy. CIT v. Takshila Educational Society (2016) 378 ITR 520 (Pat.) (HC) – Relevant para is last but one at page no. 39 of compilation.
7. Sheela Foam Ltd. v/s DCIT (Delhi ITAT) (ITA No. 4096/Del/2018 vide order dated 27.04.2020) : Relevant Para no. 16 at page no. 55 of compilation.
In all the above cases it has been held that once the reasons for issuance of notice u/s 148 do not remain valid as the AO is satisfied about the genuineness of the same and no addition/disallowance is made by him, he loses jurisdiction to assess other income of the assessee. The case of Ram Singh is that of jurisdictional High Court of Rajasthan and the case of Soyala Gram Sewa Sahakari Samiti Ltd. is that of jurisdictional ITAT Bench and hence same were required to be followed but the ld. CIT (A) without caring for the same relied on cases of non jurisdictional High Court for sustaining the action of the ld. AO, which is not correct. As per principles of judicial precents the judgements of the jurisdictional courts/ tribunals are bound to be followed. It is therefore sincerely requested that the action of the ld. CIT (A) may kindly be quashed and his directions to ld. AO for seeing the issue of LTCG once again may also kindly be set aside. The appellant has enclosed following case laws for your kind verification :-
1. 1. CIT vs Shri Ram Singh [2008] 306 ITR 343 (Raj.) - (Case Law APB 1-8) Relevant Para no. 29 and 32 at page no. 8 of compilation.
2. Soyala Gram Sewa Sahakari Samiti Ltd. Tonk (Rajasthan) v/s ITO, Tonk (Jaipur ITAT) (ITA No. 1116/JP/2024 vide order dated 08.01.2025) (Case Law APB 9-21) Relevant Para No. 9 at page 17-21 of the compilation 3. Sankhwal Realtors P Ltd. v./s ITO, Ward 22(3), Delhi (Delhi ITAT) (ITA No. 3099/Del/2022 vide order dated 30.09.2025) Relevant para no. 13 at page 31 of the compilation . Ground No. 2 : Not pressed Your honour is sincerely requested to consider the submissions favourably and allow the appeal.
6. To support the contention so raised in the written submission reliance was placed on the following decisions:
SN DESCRIPTION PAGE NO. 1 Hon’ble Rajasthan High Court in Shri Ram Singh (306 ITR 343) 1-8
2 Hon’ble ITAT Jaipur Bench in the case of Soyala Gram Sewa Sahakari Samiti 9-21
3 Hon’ble ITAT Delhi Bench in the case of Sankhwal Realtors Pvt. Ltd. (ITA No. 22-32 3099/Del/2023)
The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the case of the assessee was re-opened to verify the cash withdrawal and that of the deposit and there is no addition on the issue. The assessee co-operated to the revenue and thereby the revenue deviated from the reasons and made the addition on the issue for which there was no reasons to re-open the case and thereby the issue of jurisdiction of the ld. AO as decided by the Jurisdictional High Court in the case of Shri Ram Singh and thereby the order is required to be quashed.
8. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A).
We have heard the rival contentions and perused the material placed on record.
Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Shri Ram Singh wherein the High Court held that ; 9. We have considered the submissions, and have gone through the judgments cited at the Bar, so also the impugned judgment of the learned Tribunal.
A look at the judgment of the learned Tribunal shows, that it substantially proceeds on its earlier judgment, in the case of Maruti Guar Gum (P) Ltd., dated. 13th Aug., 2004. Since learned counsel for the Revenue pointed out, that appeal against that judgment has already been filed, and is pending before this Court, we requisitioned that file, and have gone through that order also, and find, that that order basically proceeds on the basis, that the reasons for reopening were consistently demanded by the assessee, but were not supplied, and then it has been found on merits, by holding, that otherwise also, the facts are, that the assessee had received rent in connection with leased godown and factory premises, the claim of depreciation was made by the assessee in the returns of income, therefore, in the opinion of the Tribunal, no income chargeable to tax can be said to have escaped assessment. Then reference is made to judgment of Punjab & Haryana High Court, in Atlas Cycle Industries case by observing as under: "to find support we can quote the decision of Hon'ble Supreme Court in the case of 180/319 Supreme Court in which it was held."
However, it was pointed out by learned counsel for the assessee, that as a matter of fact it was in a bunch of appeals, led by Dr. Devendra Gupta vs. ITO, that the learned Tribunal, vide order dated. 8th Sept., 2005 [reported at (2005) 97 TTJ (Jd) 561-Ed.), had decided this controversy, by giving detailed reasons. It was pointed out, that against that judgment also appeals are pending before this Court, and therefore, we requisitioned that file also, and have gone through the order of the learned Tribunal, available in that case, in an attempt to find out, as to what were the reasons, working in the mind of the Tribunal, instead of standing to ceremonies, about the propriety of construction of sentences, or propriety of expression etc.
In Dr. Devendra Gupta's case, learned Tribunal has relied upon the judgment of the Punjab & Haryana High Court, in Atlas Cycle Industries case, and concluded, that the basic condition is, that the AO has reason to believe, that any income chargeable to tax has escaped assessment, for any assessment year, and it was found, that the section puts no bar on the powers of the AO, to put to tax, any other income, chargeable to tax, which has escaped assessment, and which subsequently comes to his notice, in the course of the proceedings, but then, the prefixing words "and also", which succeeded "any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income". This expression was found to be making clear, that existence of the income, for which Ram Khilari Meena vs. ACIT the AO formed belief, to have escaped assessment, is a precondition, for including any other income chargeable to tax, escaping assessment, and coming to the notice of the AO subsequently, in the course of the proceedings. Thus, unless and until such income, as giving rise to form belief, for escaping assessment, continues to exist, and constitutes a subject-matter of assessment, under section 147 "no other income" coming to the notice of the AO, during the course of the proceedings, can be roped in.
Thus, though by undertaking a long drawn exercise, but then, we have been able to decipher the reasons, appear to have existed in the mind of the learned Tribunal, though succinctly expressed, on a subsequent occasion, in Dr. Devendra Gupta's case.
It is in the above situation, that the question as framed is required to be examined by us. Before proceeding further we may gainfully quote the relevant provisions of section 147, which read as under: "147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re- compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)"
With this, a look at the judgment cited by Mr. Bissa, being in Rajesh Jhaveri's case, and Jagan Nath Singhal's case, do show, that those judgments are slightly on different points, inasmuch as, in Rajesh Jhaveri's case, proceedings were initiated under section 147, by giving notice, which itself was under challenge, and Hon'ble the Supreme Court was examining the parameters of the expression "reason to believe", as used in section 147, and it was held as under: "the expression "reason to believe" in section 147 would mean cause or justification. If the AO has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the AO."
Likewise in Jagan Nath Singhal's case again, this very view was taken, that was also a case, where the initiation, of proceedings was challenged. It was also held, that the affidavit of the daughter of the petitioner, formed a reasonable ground for the AO, to entertain areason to believe, about the escapement of income, and therefore, it was held, that the proceedings cannot be said to be without jurisdiction. It was also clarified, that the Court was not going into the merits of the case of the assessee, the assessee was left free to lead evidence, Ram Khilari Meena vs. ACIT in the reassessment proceedings, to show, that the expenditure incurred in the daughter's marriage was upto a specified extent, and as such, no income has escaped assessment.
In the present case, initiation of the proceedings is not under challenge before us, by either side, and rightly so. Therefore, the two judgments cited by the learned counsel for the Revenue, are of no assistance to the appellant.
Then we are referred to the judgment of Hon'ble the Supreme Court. in Bankipur Club Ltd.'s case, wherein again, the question was about the jurisdiction of the AO to initiate reopening proceedings. In that case it was found, that the material on the basis of which the reason to believe was entertained, did also exist, at the time of passing of the original order of assessment, and it was not the case of the AO, that when he made the original assessment order, he was not aware of the true legal position.
Then we come to the judgment of Punjab & Haryana High Court, in Atlas Cycle Industries' case, which is a case, precisely on the point, inasmuch as, in that case, the Tribunal referred for the opinion of the High Court, the question viz., whether on the facts and in the circumstances of the case the Tribunal was right in law in cancelling the reassessment made by the ITO.
Dealing with this question, it was held by the High Court, that the Tribunal was right in cancelling the reassessment, as the two grounds, on which the reassessment notice was issued, were not found to exist, and the moment such is the position, ITO does not get the jurisdiction to make reassessment. Of course for this proposition, reliance was placed on Bankipur Club Ltd.'s case, and another judgment of Hon'ble the Supreme Court, in CIT vs. A. Raman & Co., which in turn, again was a case, dealing with the aspect of validity of commencement of the proceedings for reassessment under section 147. But then, the Division Bench of the Punjab & Haryana High Court does take the view, that once the grounds, on which the reassessment notice was issued, are not found to exist, the ITO does not get the jurisdiction, to make reassessment.
Learned counsel for the Revenue could not find, or show, any contrary judgment of this Court, or of Hon'ble the Supreme Court, or even of any other High Court of the country.
Thus, the question is required to be examined, as to whether, we should follow the judgment in Atlas Cycle Industries' case, or take a different view.
Reverting back to language of section 147, this much is clear, that the sine qua non for conferment of jurisdiction on the AO, to initiate proceedings under that section is, that he should have "reason to believe" that "any income chargeable to tax has escaped assessment for any assessment year" and that, being that situation, being available, i.e., the AO having entertained a "reason to believe", obviously on valid grounds, he acquires the jurisdiction to assess or reassess "such income", which obviously means, the income, which was chargeable to tax, and had escaped assessment for any assessment year, according to his "reason to believe", and while so assessing or reassessing, he can also, in addition, assess or reassess "any other income chargeable to tax which has escaped assessment and which may come to his notice subsequently in the course of proceedings under section 147".
Ram Khilari Meena vs. ACIT 25. The precise question, thus requiring to be considered is, as to whether, the conjunctive word used, being "and", used between the expression "such income" and "also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147" is required to be given its due, or is required to be ignored, or is required to be interpreted as "or". Obviously because, if it is to be interpreted as "or", then the language would read as under: "147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re- compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."
But then if it were to be so read, the word "also" becomes redundant, and to make sense of the sentence, the section would be required to be read by ignoring the words "also", as well, in which event, the section would read as under: "147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)."
It is established principle of interpretation of statutes, that the Parliament is presumed to be not extravagant, in using the words, and therefore, every word used in the section, is required to be given its due meaning.
If considered on that principle, leaving apart for the moment, the aspect of interpretation of the word "and" as "or", the existence of the word "also" is of a great significance, being of conjunctive nature, and leaves no manner of doubt in our opinion, that it is only when, in proceedings under section 147 the AO, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had "reason to believe" to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment. and which has come to his notice subsequently, in the course of proceedings under section 147.
To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the AO were to come to conclusion, that any income chargeable to tax, Which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to Ram Khilari Meena vs. ACIT have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147.
It is a different story that for such other income, the AO may have recourse to such other remedies, as may be available to him under law, but then, once it is found, that the income, regarding which he had "reason to believe" to have escaped assessment, is not found to have escaped assessment, the AO is required to withhold his hands, at that only.
To this extent. we agree with the view expressed by the Punjab & Haryana High Court, in Atlas Cycle Industries' case.
The result of the aforesaid discussion is, that the question framed, in the order dated. 23rd May, 2006, is required to be, and is, answered in the manner, that the Tribunal was not justified in holding, that the proceedings for reassessment under section 148/147 were initiated by the AO, on non-existing facts. because ultimately the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It is further held, that the AO was justified in initiating the proceedings under section 147/148, but then, once he came to the conclusion, that the income, with respect to which he had entertained "reason to believe" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment.
Consequently, the result is, that the appeal is dismissed.
Respectfully, following ratio as decided by our Jurisdictional High Court we considered legal ground no. 1 raised by the assessee and allow the appeal of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28/10/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 28/10/2025 Ram Khilari Meena vs. ACIT *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Ram Khilari Meena, Dausa 2. izR;FkhZ@ The Respondent- ITO, Ward, Dausa 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA No. 1292/JP/2025) vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत